Friday, February 27, 2009

Ten Years of the Euro and Amero

This year marks the tenth anniversary of the Euro and the Amero. During this decade, the Euro has brought many economic benefits to the peoples of Europe. The Amero took on life only in cyber-space. Googling the word Amero brings up 2.0 million items.

Benefits of the Euro

The Euro’s most obvious benefits are encountered by travellers, who are spared the costs and nuisances of exchanging national currencies whenever they cross borders between countries of the monetary union. Less obvious but economically more important have been lower interest rates in member countries and the absence of exchange rate fluctuations, which historically have played havoc with trade and capital flows.

These benefits of the Euro have allegedly been offset to some degree by price increases when national currencies were converted into the new currency. No statistical evidence supports this contention but it remains popular even a decade after the conversion took place. The political left criticizes the Euro because it has robbed central banks of their power to print money in payment for the creation of their favourite social programs. In the views of many observers, this fact represents a benefit, not a cost.

More profound have been the argument that the Euro robs countries of their freedom to use monetary policy to deal with economic shocks. This criticism was made of the Euro before it was launched but has been heard less during the recent boom years. It has returned with the present economic crisis, predicting that it will lead to the break-up of the monetary union.

The Future of the Euro

The controversy over this alleged fatal flaw of the Euro has its proponents point to Italy, which they predict will soon be the first to leave the union since in recent years its productivity and economic growth have lagged much behind those of other members. However, strangely enough, in spite of this poor performance of the Italian economy, the demand for the return of the lira predominantly comes from the radical left, which had been responsible for the damaging inflation-devaluation cycles of the past lira era. Few Italians want to see a return of these cycles.

By the ultimate indicator of the success of any international institution, the Euro is successful: Five new countries have joined the initial eleven since its inception. Several emerging countries in Eastern Europe have applied for admission and Western European holdouts like Iceland, Denmark and Britain are having second thoughts about joining in the light of some of the problems that accompanied the recent global financial crisis and could have been avoided if they had been members of the Euro zone.

The Amero in Cyber Space

The story of the first ten years of the Amero is much less positive. After my scholarly 1999 publication with the Fraser Institute, in which I coined the word Amero and laid out the benefits of its creation, there have been no official moves to create a Euro-style currency union in North America.

Some politicians initially showed some interest in the idea. In 2000, Mexico’s newly elected President Vicente Fox raised it during his first official visits to Washington and Ottawa. In Canada, the Senate held hearings and endorsed it, but the government paid no attention. The Governor of the Bank of Canada rejected the idea officially. In the United States, the idea never came onto the radar screen. According to someone in the know, there is not one memo on the issue in the files of the State Department.

In all three countries, the idea of the creation of the Amero and a European style monetary union immediately encountered strong public resistance, which was based mainly on nationalist sentiments and paid no attention to the economic and financial benefits it would bring. Politicians in the three countries did not find it in their interest to educate the public on the benefits and turned their attention to other politically more profitable projects.

At the same time, however, the Amero has grown exponentially in cyber space, primarily due to the activities of people in the United States who believe that their government is secretly preparing the Amero as part of a wider, ideologically driven plan to surrender US national sovereignty to a multinational organization.

The Amero and Conspiracy Theory

This conspiracy theory presently ranks as the 11th most important in the world, substantial but still much smaller than those around the assassination of President Kennedy and the sightings of Elvis Presley. The theory is supported by internet pictures of Amero coins and bank notes found on the internet.

In a documentary found on YouTube, which has had 10,000 viewings in the first three months since its posting, I am introduced as “the father of the Amero” and valiantly try to defuse the conspiracy theory by explaining my academic interest in the subject and the non-response of governments, pointing out the fact that the Amero coins shown on the net were produced as a hobby project by a retired former coin designer of the US mint and the pictures of the bank notes first appeared in a Russian newspaper not know for its journalistic integrity.

In spite of these efforts, I continue to receive personal emails asking my views on the issue and seeking advice on the benefits of buying Ameros as a protection against the effects of the current financial crisis.

I valiantly search for a silver lining in this cyber space interest in the Amero. It is possible that through their exposure to the controversy, enough voters will learn the truth about the net benefits that a North American Monetary Union would bring so that in the future politicians can afford to advocate it in public debate.

But that silver lining is very faint indeed. I am afraid that there will be no Amero in my lifetime, in spite of the great benefits that the Euro has brought to the citizens of Europe. Never having faced the consequences of nationalism the way Europeans did during two world wars, nationalism in Mexico, Canada and America continues to flourish and prevent any progress towards a North American Monetary Union.

Herbert G. Grubel